PROBLEM 1

IRENE CORPORATION

REQUIREMENT 1: ORDER POINT

ORDER POINT= ( USAGE*LEAD TIME ) + SAFETY STOCK

ORDER POINT: (1,000 UNITS*9 DAYS)
ORDER POINT: 9,000 UNITS

REQUIREMENT 2: REORDER POINT & SAFETY STOCK

SAFETY STOCK= (MAXIMUM DAILY USAGE - AVERAGE DAILY USAGE ) * LEAD TIME
AVERAGE DAILY USE: 1,000 UNITS
MULTIPLY BY: LEAD TIME: 3 DAYS
SAFETY STOCK: 3,000

REORDER POINT= ( LEAD TIME*NORMAL USE PER DAY ) + SAFETY STOCK

LEAD TIME: 9 DAYS
MULTIPLY BY: AVERAGE DAILY USE: 1,000 UNITS
TOTAL: 9,000
ADD: SAFETY STOCK: 3,000
REORDER POINT: 12,000

PROBLEM 2
AILENE CORPORATION

REQUIREMENT 1: REORDER POINT

REORDER POINT= ( LEAD TIME*NORMAL USE PER DAY ) + SAFETY STOCK

LEAD TIME: 7 DAYS
MULTIPLY BY: AVERAGE DAILY USE: 1,500 UNITS
TOTAL: 10,500
ADD: SAFETY STOCK: 0
REORDER POINT: 10,500

REQUIREMENT 1: REORDER POINT

SAFETY STOCK= (MAXIMUM DAILY USAGE - AVERAGE DAILY USAGE ) * LEAD TIME
AVERAGE DAILY USE: 1,500 UNITS
MULTIPLY BY: LEAD TIME: 2 DAYS
 SAFETY STOCK: 3,000

REORDER POINT= ( LEAD TIME*NORMAL USE PER DAY ) + SAFETY STOCK

LEAD TIME: 7 DAYS
MULTIPLY BY: AVERAGE DAILY USE: 1,500 UNITS
TOTAL: 10,500
ADD: SAFETY STOCK: 3,000
REORDER POINT: 13,500

PROBLEM 3
GERALD INCORPORATION

ECONOMIC ORDER QUANTITY= √2QO/C

ECONOMIC ORDER QUANTITY: √2( 2,500 UNITS*P25)/(500 UNITS*0.10)
ECONOMIC ORDER QUANTITY: √(125,000)/(50 UNITS)
ECONOMIC ORDER QUANTITY: √2500
ECONOMIC ORDER QUANTITY: 50

TOTAL CARRYING COST (50/2)*50

TOTAL CARRYING COST 25*50
TOTAL CARRYING COST 1250

PROBLEM 4
HUROM CORPORATION

ECONOMIC ORDER QUANTITY= √2QO/C

ECONOMIC ORDER QUANTITY: √2(20,000 UNITS*P20)/P5
ECONOMIC ORDER QUANTITY: √(800,000)/(P5)
ECONOMIC ORDER QUANTITY: √160,000
ECONOMIC ORDER QUANTITY: 400

NUMBER OF ORDERS 20,000/ 400

NUMBER OF ORDERS 50

REORDER POINT= ( LEAD TIME*NORMAL USE PER DAY ) + SAFETY STOCK

LEAD TIME: 5 DAYS
MULTIPLY BY: AVERAGE DAILY USE: 80 UNITS
 TOTAL: 400
ADD: SAFETY STOCK: 200
REORDER POINT: 600

PROBLEM 5

ECONOMIC ORDER QUANTITY= √2QO/C

ECONOMIC ORDER QUANTITY: √2(225,000 UNITS*P1,200)/(3,000 UNITS*0.20)
ECONOMIC ORDER QUANTITY: √(540,000,000)/(60 UNITS)
ECONOMIC ORDER QUANTITY: √9,000,000
ECONOMIC ORDER QUANTITY: 3,000

NUMBER OF ORDERS 225,000/3,000

NUMBER OF ORDERS 75

PROBLEM 6

PROBLEM 7

ECONOMIC ORDER QUANTITY= √2QO/C

ECONOMIC ORDER QUANTITY: √2(600,000 UNITS*P6,000)/ (P2,000*0.10)
ECONOMIC ORDER QUANTITY: √7,200,000,000)/(P200)
ECONOMIC ORDER QUANTITY: √36,000
ECONOMIC ORDER QUANTITY: 6,000

PROBLEM 8
 PRODUCT A
ECONOMIC ORDER QUANTITY= √2QO/C
ECONOMIC ORDER QUANTITY: √2(90,000 UNITS*P9)/P5
ECONOMIC ORDER QUANTITY: √(1,620,000)/(P5)
ECONOMIC ORDER QUANTITY: √324,000
ECONOMIC ORDER QUANTITY: 569

PRODUCT B
ECONOMIC ORDER QUANTITY= √2QO/C
ECONOMIC ORDER QUANTITY: √2(60,000 UNITS*P10)/P4
ECONOMIC ORDER QUANTITY: √(1,200,000)/(P4)
ECONOMIC ORDER QUANTITY: √300,000
ECONOMIC ORDER QUANTITY: 548

PRODUCT C
ECONOMIC ORDER QUANTITY= √2QO/C
ECONOMIC ORDER QUANTITY: √2(40,000 UNITS*P12)/P3
ECONOMIC ORDER QUANTITY: √(960,000)/(P3)
ECONOMIC ORDER QUANTITY: √320,000
ECONOMIC ORDER QUANTITY: 566

PROBLEM 9

ECONOMIC ORDER QUANTITY= √2QO/C

ECONOMIC ORDER QUANTITY: √2(4,320 UNITS*P500)/P5
ECONOMIC ORDER QUANTITY: √(4,320,000)/(P5)
ECONOMIC ORDER QUANTITY: √864000
ECONOMIC ORDER QUANTITY: 930

SAFETY STOCK= (MAXIMUM DAILY USAGE - AVERAGE DAILY USAGE ) * LEAD TIME
MAXIMUM DAILY USE: 20 UNITS
MULTIPLY BY: LEAD TIME: 10 DAYS
SAFETY STOCK: 200

REORDER POINT= ( LEAD TIME*NORMAL USE PER DAY ) + SAFETY STOCK

LEAD TIME: 10 DAYS
MULTIPLY BY: MAXIMUM DAILY USE: 20 UNITS
TOTAL: 200
ADD: SAFETY STOCK: 200
 REORDER POINT: 400

PROBLEM 10

SAFETY STOCK= (MAXIMUM DAILY USAGE - AVERAGE DAILY USAGE ) * LEAD TIME
MAXIMUM DAILY USE 460 UNITS
LESS:AVERAGE DAILY USE: 400 UNITS
TOTAL: 60 UNITS
MULTIPLY BY: LEAD TIME: 10 DAYS
SAFETY STOCK: 600

REORDER POINT= ( LEAD TIME*NORMAL USE PER DAY ) + SAFETY STOCK

LEAD TIME: 10 DAYS
MULTIPLY BY: MAXIMUM DAILY USE: 400 UNITS
TOTAL: 4,000
ADD: SAFETY STOCK: 600
REORDER POINT: 4,600

AVERAGE INVENTORY = ( EOQ/AVERAGE INVENTORY ) + SAFETY STOCK

EOQ: 4,000 UNITS
DIVIDED BY: 2
AVERAGE INVENTORY: 2,000
ADD: SAFETY STOCK: 4,600
TOTAL AVERAGE INVENTORY: 6,600

NORMAL COST INVENTORY = ( ORDER POINT - (AVERAGE DAILY USE*LEADTIME) + EOQ

ORDER POINT 4,600 UNITS
LESS: AVERAGE DAILY USE*LEAD TIME 4,000
TOTAL : 600
ADD: EOQ: 4,000
NORMAL MAXIMUM INVENTORY: 4,600

ABSOLUTE MAXIMUM INVENTORY = ( ORDER POINT - (MINIMUM DAILY USE*LEADTIME) + EO

 ORDER POINT 4,600 UNITS
LESS: MINIMUM DAILY USE*LEAD TIME 3,000
TOTAL : 1,600
ADD: EOQ: 4,000
ABSOLUTE MAXIMUM INVENTORY: 5,600

EOQ= √((2*AVERAGE ANNUAL USAGE*COST PER ORDER)/ CARRYING COST PER UNIT PER YEA

4,000= √((2 *400 UNITS*250 WORKDAYS*P80)/CARRYING COST PER UNIT FOR ONE YEAR

4,000= (√16,000,000)/ CARRYING COST PER UNIT FOR ONE YEAR

4,000= (√16,000,000)/ CARRYING COST PER UNIT FOR ONE YEAR
4,000= (4,000)/ CARRYING COST PER UNIT FOR ONE YEAR
CARRYING COST PER UNIT FOR ONE YEAR= 4,000/4,000
CARRYING COST PER UNIT FOR ONE YEAR= P1.00

PROBLEM 11

ECONOMIC ORDER QUANTITY= √2QO/C

14,400=√2(QUANTITY*P1,260)/P3.15
14,400=√2(QUANTITY*P1,260)/P3.15
14,400=( (√2(QUANTITY*P1,260)) ^2 / (P3.15)*3.15
(14,400^2)*3.15=( (√2(QUANTITY*P1,260)) ^2 / (P3.15)*3.15
(207,360,000)*3.15=( 2(QUANTITY*P1,260)
653,184,000=( 2(QUANTITY*P1,260) /2*1260
653,184,000/2520= (QUANTITY)
259,200= (QUANTITY)
ESTIMATED ANNUAL DEMAND: 259,200

PROBLEM 12

EOQ= 20,000
ANNUAL ORDERING COST PER UNIT= P4,175
 ANNUAL CARRYING COST= P83,500,000

PROBLEM 13

ECONOMIC ORDER QUANTITY= √2QO/C

ECONOMIC ORDER QUANTITY: √2(14,000*P62)/P1
ECONOMIC ORDER QUANTITY: √1,736,000)/(P1)
ECONOMIC ORDER QUANTITY: √1,736,000
ECONOMIC ORDER QUANTITY: 1,318

SAFETY STOCK= (MAXIMUM DAILY USAGE - AVERAGE DAILY USAGE ) * LEAD TIME
MAXIMUM DAILY USE: 38 UNITS
MULTIPLY BY: LEAD TIME: 24 DAYS
SAFETY STOCK: 912

REORDER POINT= ( LEAD TIME*NORMAL USE PER DAY ) + SAFETY STOCK

LEAD TIME: 24 DAYS
MULTIPLY BY: MAXIMUM DAILY USE: 38 UNITS
TOTAL: 912
ADD: SAFETY STOCK: 912
REORDER POINT: 1,824
NT

AFETY STOCK

AFETY STOCK

DAILY USAGE ) * LEAD TIME

DAY ) + SAFETY STOCK

OINT

DAY ) + SAFETY STOCK

OINT

DAILY USAGE ) * LEAD TIME

DAY ) + SAFETY STOCK

2QO/C

1 2 3
ORDER SIZE NO. OF ORDERS TOTAL ORDER COST
100 80 1600
200 70 1400
300 60 1200
400 50 1000
500 40 800
600 30 600
700 20 400
800 10 200

DAY ) + SAFETY STOCK

(20,000 units annually/250 workdays in 1 year)

2QO/C

2QO/C
2QO/C

2QO/C

2QO/C

2QO/C

DAILY USAGE ) * LEAD TIME

DAY ) + SAFETY STOCK

DAILY USAGE ) * LEAD TIME

DAY ) + SAFETY STOCK

ORY ) + SAFETY STOCK

DAILY USE*LEADTIME) + EOQ

MUM DAILY USE*LEADTIME) + EOQ

RRYING COST PER UNIT PER YEAR)

2QO/C
2QO/C

DAILY USAGE ) * LEAD TIME

DAY ) + SAFETY STOCK

 4 5 6
AVERAGE INVENTORY TOTAL CARRYING COST TOTAL ORDERS AND CARRYING COST
50 250 1850
100 500 1900
150 750 1950
200 1000 2000
250 1250 2050
300 1500 2100
350 1750 2150
400 2000 2200
 PROBLEM 14

UNITS UNIT COST TOTAL COST UNIT ON HAND

BALANCE JAN. 1 5,000 100 500,000 5,000
PURCHASED JAN. 10 3,000 300 900,000 8,000
SALE JAN.20 4,500 3,500
PURCHASED JAN 28 2,000 500 1,000,000 5,500

WEIGHTED AVERAGE-PERPETUAL METHOD

BEGINNING BALANCE: 500,000
ADD: PURCHASES: 1,900,000
TOTAL MATERIALS AVAILABLE: 2,400,000
LESS: MATERIALS ENDING BALANCE: 1,612,500
MATERIAL ISSUED: (USED) 787,500

LIFO-PERPETUAL METHOD
BEGINNING BALANCE: 500,000
ADD: PURCHASES: 1,900,000
TOTAL MATERIALS AVAILABLE: 2,400,000
LESS: MATERIALS ENDING BALANCE: 1,350,000
MATERIAL ISSUED: (USED) 1,050,000

FIFO-PERPETUAL METHOD
BEGINNING BALANCE: 500,000
ADD: PURCHASES: 1,900,000
TOTAL MATERIALS AVAILABLE: 2,400,000
LESS: MATERIALS ENDING BALANCE: 1,950,000
MATERIAL ISSUED: (USED) 450,000
 WEIGHTED AVERAGE-PERPETUAL METHOD
PURCHASED ISSUANCE BALANCE
DATE
UNITS UNIT COST TOTAL UNITS UNIT COST TOTAL UNITS
1-Jan 5,000
10-Jan 3,000 300 900,000 8,000
20-Jan 4,500 175 1,400,000 3,500
28-Jan 2,000 500 1,000,000 5,500
TOTAL 5,500

LIFO-PERPETUAL METHOD
PURCHASED ISSUANCE BALANCE
DATE
UNITS UNIT COST TOTAL UNITS UNIT COST TOTAL UNITS
1-Jan 5,000
5,000
10-Jan 3,000 300 900,000
3,000
20-Jan 3,000 300 900,000
1,500 100 150,000 3,500
3,500
28-Jan 2,000 500 1,000,000
2,000
TOTAL 5,500

LIFO-PERPETUAL METHOD
PURCHASED ISSUANCE BALANCE
DATE
UNITS UNIT COST TOTAL UNITS UNIT COST TOTAL UNITS
1-Jan 5,000
5,000
10-Jan 3,000 300 900,000
3,000
500
20-Jan 4,500 100 450,000
3,000
500
28-Jan 2,000 500 1,000,000 3,000
2,000
TOTAL 5,500
 BALANCE
UNIT COST TOTAL
100 500,000
175 1,400,000
175 612,500
293 1,612,500
1,612,500

BALANCE
UNIT COST TOTAL
100 500,000
100 500,000
300 900,000

100 350,000
100 350,000
500 1,000,000
1,350,000

BALANCE
UNIT COST TOTAL
100 500,000
100 500,000
300 900,000
100 50,000
300 900,000
100 50,000
300 900,000
500 1,000,000
1,950,000
PROBLEM 15

PRODUCT UNITS UNIT COST TOTAL COST NRV PER UNIT

A 500 500 250,000 510
B 1,000 250 250,000 225
C 1,500 750 1,125,000 800
D 2,000 375 750,000 385
E 2,500 125 312,500 100
TOTAL NRV COST LCNRV
255,000 250,000
225,000 225,000
1,200,000 1,125,000
770,000 750,000
250,000 250,000
 PROBLEM 16

PURCHASE UNITS BALANCE

DATE PRICE UNIT SOLD UNITS
1-Jan 100 10,000 10,000
15-Jan 5,000 5,000
18-Jan 110 15,000 20,000
20-Jan 100 500 20,500
30-Jan 5,500 15,000

WEIGHTED AVERAGE-PERPETUAL METHOD

BEGINNING BALANCE: 1,000,000
ADD: PURCHASES: 1,700,000
TOTAL MATERIALS AVAILABLE: 2,700,000
LESS: MATERIALS ENDING BALANCE: 1,282,500
MATERIAL ISSUED: (USED) 1,417,500

LIFO-PERPETUAL METHOD
BEGINNING BALANCE: 1,000,000
ADD: PURCHASES: 1,700,000
TOTAL MATERIALS AVAILABLE: 2,700,000
LESS: MATERIALS ENDING BALANCE: 1,600,000
MATERIAL ISSUED: (USED) 1,100,000

FIFO-PERPETUAL METHOD
BEGINNING BALANCE: 1,000,000
ADD: PURCHASES: 1,700,000
TOTAL MATERIALS AVAILABLE: 2,700,000
LESS: MATERIALS ENDING BALANCE: 1,645,000
MATERIAL ISSUED: (USED) 1,055,000
TOTAL COST
1,000,000

1,650,000
50,000

WEIGHTED AVERAGE-PERPETUAL METHOD

PURCHASED ISSUANCE
DATE
UNITS UNIT COST TOTAL UNITS UNIT COST TOTAL
1-Jan
10-Jan 5,000 100 500,000
18-Jan 15,000 110 1,650,000
20-Jan 500 100 50,000
30-Jan 5,500 85 467,500
TOTAL

LIFO-PERPETUAL METHOD
PURCHASED ISSUANCE
DATE
UNITS UNIT COST TOTAL UNITS UNIT COST TOTAL
1-Jan
10-Jan 5,000 100 500,000

18-Jan 15,000 110 1,650,000

20-Jan 500 100 50,000

500 100 50,000

30-Jan 5,000 110 1,650,000

TOTAL

FIFO-PERPETUAL METHOD
PURCHASED ISSUANCE
DATE
UNITS UNIT COST TOTAL UNITS UNIT COST TOTAL
1-Jan
10-Jan 5,000 100 50,000

18-Jan 15,000 110 1,650,000

20-Jan 500 100 50,000

20-Jan 500 100 50,000

30-Jan 5,500 100 550,000

TOTAL
 METHOD
BALANCE
UNITS UNIT COST TOTAL
10,000 100 1,000,000
5,000 100 500,000
20,000 85 1,700,000
20,500 85 1,750,000
15,000 86 1,282,500
15,000 1,282,500

OD
BALANCE
UNITS UNIT COST TOTAL
10,000 100 1,000,000
5,000 100 500,000
5,000 100 500,000
15,000 110 1,650,000
5,000 100 500,000
15,000 110 1,650,000
500 100 50,000
10,000 110 1,100,000
5,000 100 500,000

15,000 1,600,000

OD
BALANCE
UNITS UNIT COST TOTAL
10,000 100 1,000,000
5,000 100 500,000
5,000 100 500,000
15,000 110 1,650,000
5,000 100 500,000
15,000 110 1,650,000
 500 100 50,000
14,500 110 1,595,000
500 100 50,000

15,000 1,645,000
 PROBLEM 17

GROSS METHOD N

Materials 200,000
Accounts Payable 200,000
To record purchased of materials

1. Assume paid within the discount period 1. Assume paid within the disco

Accounts Payable 200,000

Purchase Discount 2,000
Materials 198,000
To record payment of materials within discount period
2. Assume not paid within the d
2. Assume not paid within the discount period

Accounts Payable 200,000

Materials 200,000
To record payment of materials
 NET METHOD

Materials 198,000
Accounts Payable 198,000
To record purchased of materials

1. Assume paid within the discount period

Accounts Payable 198,000

Materials 198,000
To record payment of materials within discount period

2. Assume not paid within the discount period

Accounts Payable 198,000

Loss on purchase discount 2,000
Materials 200,000
To record payment of materials